According to NBC, Rice has sent a letter to Obama announcing her
decision.

“If nominated, I am now convinced that the confirmation process
would be lengthy, disruptive and costly – to you and to our most
pressing national and international priorities,” Rice wrote in
the letter. “That trade-off is simply not worth it to our
country...Therefore, I respectfully request that you no longer
consider my candidacy at this time."

The announcement marks the culmination of weeks of partisan
tensions over Rice, who was rumored to have been the White House
favorite to replace Hillary
Clinton. Republicans, led by Sens. John McCain (R-AZ) and
Lindsey Graham (R-S.C.), have led a visceral assault on Rice,
making it clear that she would be in for a long and nasty
confirmation battle should Obama choose to nominate her. And
McCain's appointment to the Senate Foreign Relations committee
this week virtually guaranteed that Republicans would block
Rice's appointment.

Although Obama initially seemed reluctant to cave to
McCain's threats, it's become increasingly clear that it would be
unwise for the President to pick a fight over Rice while also
trying to reach a deal with Republicans on the fiscal
cliff.

The issues with Rice have largely centered around her appearances
on Sunday news shows in the days following the Sept. 11 attacks
on U.S. diplomatic personnel in Libya, when she suggested that
the attacks were a spontaneous demonstration in response to an
obscure anti-Muslim YouTube
video. Of course, those claims turned out to false.

Although the case against Rice was not particularly strong, few
came to her defense. And over the last week, criticism of Rice
has expanded to include questions about her dealings with African
diplomats as deputy Secretary of African Affairs under the
Clinton administration, and about her stake in the company that
is building the Keystone Pipeline.

In her letter to Obama, Rice acknowledges the attacks, taking a
shot at her partisan detractors:

“The position of Secretary of State should never be
politicized,” she wrote. “I’m saddened that we have reached this
point, even before you have decided whom to nominate. We cannot
afford such an irresponsible distraction from the most pressing
issues facing the American people.”

She ends by thanking the President for his "extraordinary
personal support during these past several weeks."

UPDATE, 3:55 p.m.:

Here's Obama's statement responding to Rice's decision:

Today, I spoke to Ambassador Susan
Rice, and accepted her decision to remove her name from
consideration for Secretary of State. For two decades, Susan has
proven to be an extraordinarily capable, patriotic, and
passionate public servant. As my Ambassador to the United
Nations, she plays an indispensable role in advancing America’s
interests. Already, she has secured international support for
sanctions against Iran and North Korea, worked to protect the
people of Libya, helped achieve an independent South Sudan, stood
up for Israel’s security and legitimacy, and served as an
advocate for UN reform and the human rights of all people. I am
grateful that Susan will continue to serve as our Ambassador at
the United Nations and a key member of my cabinet and national
security team, carrying her work forward on all of these and
other issues. I have every confidence that Susan has limitless
capability to serve our country now and in the years to come, and
know that I will continue to rely on her as an advisor and
friend. While I deeply regret the unfair and misleading attacks
on Susan Rice in recent weeks, her decision demonstrates the
strength of her character, and an admirable commitment to rise
above the politics of the moment to put our national interests
first. The American people can be proud to have a public servant
of her caliber and character representing our country.